Nature of the power of taxation
 Inherent power of the state; essential and inherent
attribute of sovereignty
Honda Cars v. Honda Union: “Taxation is the State’s inherent
power; its imposition cannot be subject to the will of the
parties.”
o Police Power
LTO v. Butuan: “Police power and taxation, along with eminent
domain, are inherent powers of sovereignty which the State
might share with local government units by delegation given
under a constitutional or a statutory fiat. All these inherent
powers are for a public purpose and legislative in nature but
the similarities just about end there. The basic aim of police
power is public good and welfare. Taxation, in its case, focuses
an the power of government to raise revenue in order to
support its existence and carry out its legitimate objectives.
Although correlative to each other in many respects, the grant
of one does not necessarily carry with it the grant of the other.
The two powers are, by tradition and jurisprudence, separate
and distinct powers, varying in their respective concepts,
character, scopes and limitations.”
o Eminent Domain
 Legislative in nature
Wee Poco v. Posadas: (Laurel, concurring) “The power of
taxation being legislative, all its incidents are within the control
of the legislature. The remedies to be afforded the taxpayer,
the mode and method to be pursued, and the conditions to be
complied with, are matters within the discretion of the
legislature, and in respect to which its determination should be
and is final.”
o Cannot be delegated
De la Llana v. Alba: “The basic postulate that underlies the
doctrine of non-delegation is that it is the legislative body which
is entrusted with the competence to make laws and to alter and
repeal them, the test being the completeness of the statue in
all its terms and provisions when enacted.”
“As pointed out in Edu v. Ericta: ‘To avoid the taint of
unlawful delegation, by it…there must be a standard, which
implies at the very least that the legislature itself determines
matters of principle and lays down fundamental policy…A
standard thus defines legislative policy, marks its limits, maps
out its boundaries and specifies the public agency to apply it. It
indicates the circumstances under which the legislative
command is to be effected. Thereafter, the executive or
administrative office designated may in pursuance of the above
guidelines promulgate supplemental rules and regulations. The
standard may be either express or implied.’”
o Exceptions to restriction on delegation
 Delegation to the local government
(Consti, Art. X)
SECTION 3.
The Congress shall enact a local government code which
shall provide for a more responsive and accountable local
government structure instituted through a system of
decentralization with effective mechanisms of recall,
initiative, and referendum, allocate among the different local
government units their powers, responsibilities, and
resources, and provide for the qualifications, election,
appointment and removal, term, salaries, powers and
functions and duties of local officials, and all other matters
relating to the organization and operation of the local units.
SECTION 5. Each local government unit shall have the
power to create its own sources of revenues and to levy
taxes, fees, and charges subject to such guidelines and
limitations as the Congress may provide, consistent with the
basic policy of local autonomy. Such taxes, fees, and
charges shall accrue exclusively to the local governments.
MCIAA v. Marcos: The general rule is the taxing powers of
LGUs cannot extend to the levy of inter alia, "taxes, fees, and
charges of any kind of the National Government, its agencies
and instrumentalities, and local government units.” However,
provinces, cities, municipalities in the Metropolitan Manila Area
may impose the real property tax except on, inter alia, "real
property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial used thereof
has been granted, for consideration or otherwise, to a taxable
person.”
Ferrer v. Bautista: “Indeed, LGUs have no inherent power to
tax except to the extent that such power might be delegated to
them either by the basic law or by the statute. ‘Under the now
prevailing Constitution, where there is neither a grant nor a
prohibition by statute, the tax power must be deemed to exist
although Congress may provide statutory limitations and
guidelines. The basic rationale for the current rule is to
safeguard the viability and self-sufficiency of local government
units by directly granting them general and broad tax powers.
Nevertheless, the fundamental law did not intend the
delegation to be absolute and unconditional; the constitutional
objective obviously is to ensure that, while the local
government units are being strengthened and made more
autonomous, the legislature must still see to it that (a) the
taxpayer will not be over-burdened or saddled with multiple and
unreasonable impositions; (b) each local government unit will
have its fair share of available resources; (c) the resources of
the national government will not be unduly disturbed; and (d)
local taxation will be fair, uniform, and just.’
Subject to the provisions of the LGC and consistent
with the basic policy of local autonomy, every LGU is now
empowered and authorized to create its own sources of
revenue and to levy taxes, fees, and charges which shall
accrue exclusively to the local government unit as well as to
apply its resources and assets for productive, developmental,
or welfare purposes, in the exercise or furtherance of their
governmental or proprietary powers and functions.”
 Delegation to the President
(Consti, Art. VI) SECTION 28.
(2) The Congress may, by law, authorize the President to fix
within specified limits, and subject to such limitations and
restrictions as it may impose, tariff rates, import and export
quotas, tonnage and wharfage dues, and other duties or
imposts within the framework of the national development
program of the Government.
Donnelly v. Agregado: Under the Constitution, “Congress may
by law authorize the President, subject to certain limitations, to
fix, within specified limits, tariff rates, import or export quotas,
and tonnage and wharfage dues.”
“The fact that the resolution was approved by the
Cabinet and the collection of the royalty fees was not decreed
by virtue of an order issued by the President himself does not,
in our opinion, invalidate said resolution because it cannot be
disputed that the act of the Cabinet is deemed to be, and
essentially is, the act of the President.”
 “The rule which forbids delegation of legislative power
is not absolute. It admits of exceptions as when the
Constitution itself authorizes such delegation. In the present
case, our Constitution expressly authorizes such delegation.
(Article VI, section 22 [2].) This is so because the royalty rates
may take the form of tariff rates.”
 Delegation to administrative agencies
CIR v. CA and Fortune Tobacco: (Bellosillo sep opinion)
“Administrative agencies posses quasi-legislative or rule
making powers and quasi-judicial or administrative adjudicatory
powers. Quasi-legislative or rule making power is the power to
make rules and regulations which results in delegated
legislation that is within the confines of the granting statute and
the doctrine of nondelegability and separability of powers.”
“Interpretative rule, one of the three (3) types of quasi-
legislative or rule making powers of an administrative agency
(the other two being supplementary or detailed legislation, and
contingent legislation), is promulgated by the administrative
agency to interpret, clarify or explain statutory regulations
under which the administrative body operates. The purpose or
objective of an interpretative rule is merely to construe the
statute being administered. It purports to do no more than
interpret the statute. Simply, the rule tries to say what the
statute means. Generally, it refers to no single person or party
in particular but concerns all those belonging to the same class
which may be covered by the said interpretative rule. It need
not be published and neither is a hearing required since it is
issued by the administrative body as an incident of its power to
enforce the law and is intended merely to clarify statutory
provisions for proper observance by the people.”
“Quasi-judicial or administrative adjudicatory power on
the other hand is the power of the administrative agency to
adjudicate the rights of persons before it. It is the power to hear
and determine questions of fact to which the legislative policy
is to apply and to decide in accordance with the standards laid
down by the law itself in enforcing and administering the same
law. The administrative body exercises its quasi-judicial power
when it performs in a judicial manner an act which is
essentially of an executive or administrative nature, where the
power to act in such manner is incidental to or reasonably
necessary for the performance of the executive or
administrative duty entrusted to it. In carrying out their quasi-
judicial functions the administrative officers or bodies are
required to investigate facts or ascertain the existence of facts,
hold hearings, weigh evidence, and draw conclusions from
them as basis for their official action and exercise of discretion
in a judicial nature. Since rights of specific persons are affected
it is elementary that in the proper exercise of quasi-judicial
power due process must be observed in the conduct of the
proceedings.”
Limitation on taxation
Sec. 27 (2), 28, 29(2) (3), Art. VI, Consti
SECTION 29.
(2) No public money or property shall be appropriated,
applied, paid, or employed, directly or indirectly, for the use,
benefit, or support of any sect, church, denomination,
sectarian institution, or system of religion, or of any priest,
preacher, minister, or other religious teacher, or dignitary as
such, except when such priest, preacher, minister, or
dignitary is assigned to the armed forces, or to any penal
institution, or government orphanage or leprosarium.
 General Principle
Sison v. Ancheta: “It is, of course, to be admitted that for all its
plenitude 'the power to tax is not unconfined. There are
restrictions. The Constitution sets forth such limits . Adversely
affecting as it does property rights, both the due process and
equal protection clauses may properly be invoked, xxx, to
invalidate in appropriate cases a revenue measure.”
“[T]he due process clause may be invoked where a
taxing statute is so arbitrary that it finds no support in the
Constitution. An obvious example is where it can be shown to
amount to the confiscation of property… It has also been held
that where the assailed tax measure is beyond the jurisdiction
of the state, or is not for a public purpose, or, in case of a
retroactive statute is so harsh and unreasonable, it is subject to
attack on due process grounds.”
“Now for equal protection. The applicable standard to
avoid the charge that there is a denial of this constitutional
mandate whether the assailed act is in the exercise of the
police power or the power of eminent domain is to demonstrate
that the governmental act assailed, far from being inspired by
the attainment of the common weal was prompted by the spirit
of hostility, or at the very least, discrimination that finds no
support in reason. It suffices then that the laws operate equally
and uniformly on all persons under similar circumstances or
that all persons must be treated in the same manner, the
conditions not being different, both in the privileges conferred
and the liabilities imposed. Favoritism and undue preference
cannot be allowed. For the principle is that equal protection
and security shall be given to every person under
circumstances which if not identical are analogous. If law be
looked upon in terms of burden or charges, those that fall
within a class should be treated in the same fashion, whatever
restrictions cast on some in the group equally binding on the
rest." That same formulation applies as well to taxation
measures.”
“According to the Constitution: ‘The rule of taxation
shag be uniform and equitable.’ This requirement is met xxx
when the tax ‘operates with the same force and effect in every
place where the subject may be found.’”
 Limitations
o Due process of law
(Consti, Art. III) SECTION 1.
No person shall be deprived of life, liberty, or property
without due process of law, nor shall any person be denied
the equal protection of the laws.
 When due process is considered
violated
 When taxation is not for public
purpose
 When levied beyond territorial
limits
 When arbitrary methods are
used in assessing and
collecting taxes
 When law is so arbitrary that it
finds no support in Constitution
o Equal protection of laws
 Sec. 1, Art. III, Consti, supra
o Uniformity and equity
(Consti, Art. VI) SECTION 28.
(1) The rule of taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of taxation.
o Directive to evolve a progressive system of
taxation
 Sec. 28, Art. VI, Consti, supra
 o International law
(Consti, Art. II) SECTION 2.
The Philippines renounces war as an instrument of national
policy, adopts the generally accepted principles of
international law as part of the law of the land and adheres
to the policy of peace, equality, justice, freedom,
cooperation, and amity with all nations.
o Prohibition against imprisonment for non-
payment of poll tax
(Consti, Art. III) SECTION 20.
No person shall be imprisoned for debt or non-payment of a
poll tax.
o Non-impairment of contract
(Consti, Art. III) SECTION 10.
No law impairing the obligation of contracts shall be passed.
 Grant of franchise
(Consti, Art. XII) SECTION 11.
No franchise, certificate, or any other form of authorization
for the operation of a public utility shall be granted except to
citizens of the Philippines or to corporations or associations
organized under the laws of the Philippines at least sixty per
centum of whose capital is owned by such citizens, nor shall
such franchise, certificate, or authorization be exclusive in
character or for a longer period than fifty years. Neither shall
any such franchise or right be granted except under the
condition that it shall be subject to amendment, alteration, or
repeal by the Congress when the common good so
requires. The State shall encourage equity participation in
public utilities by the general public. The participation of
foreign investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in its
capital, and all the executive and managing officers of such
corporation or association must be citizens of the
Philippines.
o Religion clauses
 Free exercise of religion
(Consti, Art. III) SECTION 5.
No law shall be made respecting an establishment of
religion, or prohibiting the free exercise thereof. The free
exercise and enjoyment of religious profession and worship,
without discrimination or preference, shall forever be
allowed. No religious test shall be required for the exercise
of civil or political rights.
 Non-establishment of religion
(Consti, Art. VI) SECTION 29.
(2) No public money or property shall be appropriated,
applied, paid, or employed, directly or indirectly, for the use,
benefit, or support of any sect, church, denomination,
sectarian institution, or system of religion, or of any priest,
preacher, minister, or other religious teacher, or dignitary as
such, except when such priest, preacher, minister, or
dignitary is assigned to the armed forces, or to any penal
institution, or government orphanage or leprosarium.
 Exemption of lands, buildings and
improvements actually, directly, and
exclusively used for religious, charitable
or educational purposes
(Consti, Art. VI) SECTION 28.
(3) Charitable institutions, churches and parsonages or
convents appurtenant thereto, mosques, non-profit
cemeteries, and all lands, buildings, and improvements,
actually, directly, and exclusively used for religious,
charitable, or educational purposes shall be exempt from
taxation.
 Exemption of property from
taxation; taxation of income
from use or transfer of property
NIRC
SEC. 30. Exemptions from Tax on Corporations. - The
following organizations shall not be taxed under this Title in
respect to income received by them as such:
(E) Nonstock corporation or association organized and
operated exclusively for religious, charitable, scientific,
athletic, or cultural purposes, or for the rehabilitation of
veterans, no part of its net income or asset shall belong to
or inure to the benefit of any member, organizer, officer or
any specific person;
(H) A nonstock and nonprofit educational institution;
(K, par. 2) Notwithstanding the provisions in the preceding
paragraphs, the income of whatever kind and character of
the foregoing organizations from any of their properties, real
or personal, or from any of their activities conducted for
profit regardless of the disposition made of such income,
shall be subject to tax imposed under this Code.
o Exemption of non-stock, non-profit educational
institutions; proprietary educational institutions
(Consti, Art XIV) SECTION 4.
(3) All revenues and assets of non-stock, non-profit
educational institutions used actually, directly, and
exclusively for educational purposes shall be exempt from
taxes and duties. Upon the dissolution or cessation of the
corporate existence of such institutions, their assets shall be
disposed of in the manner provided by law.
Proprietary educational institutions, including those
cooperatively owned, may likewise be entitled to such
exemptions subject to the limitations provided by law
including restrictions on dividends and provisions for
reinvestment.
(4) Subject to conditions prescribed by law, all grants,
endowments, donations, or contributions used actually,
directly, and exclusively for educational purposes shall be
exempt from tax.
 Non-stock, non-profit educational
institution
 Proprietary educational institutions
o Infringement of press freedom
(Consti, Art. III) SECTION 4.
No law shall be passed abridging the freedom of speech, of
expression, or of the press, or the right of the people
peaceably to assemble and petition the government for
redress of grievances.
 o Voting requirement for grant of tax exemption
(Consti, Art. VI) SECTION 28.
(4) No law granting any tax exemption shall be passed
without the concurrence of a majority of all the Members of
the Congress.
o Taxes levied for a special purpose treated as a
special fund
(Consti, Art. VI) SECTION 29.
(3) All money collected on any tax levied for a special
purpose shall be treated as a special fund and paid out for
such purpose only. If the purpose for which a special fund
was created has been fulfilled or abandoned, the balance, if
any, shall be transferred to the general funds of the
Government.
o Veto of appropriation revenue and tariff bills by
the President
(Consti, Art. VI) SECTION 27.
(2) The President shall have the power to veto any particular
item or items in an appropriation, revenue, or tariff bill, but
the veto shall not affect the item or items to which he does
not object.
 Item veto
o Revenue bills shall originate from the HoR
(Consti, Art. VI) SECTION 24.
All appropriation, revenue or tariff bills, bills authorizing
increase of the public debt, bills of local application, and
private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur
with amendments.
Revenue issuances signed by the Secretary of
Regulations Finance, upon recommendation of the
(RR) Commissioner of Internal Revenue, that
specify, prescribe or define rules and
regulations for the effective
enforcement of the provisions of the
NIRC and related statutes
Revenue issuances that provide directives or
Memorandum instructions; prescribe guidelines; and
Orders (RMO) outline processes, operations, activities,
workflows, methods and procedures
necessary in the implementation of
stated policies, goals, objectives,
plans and programs of the Bureau in
all areas of operations, except auditing
Revenue issuances that publish pertinent and
Memorandum applicable portions, as well as
Circular (RMC) amplifications, of laws, rules,
regulations and precedents issued by
the BIR and other agencies/offices
Revenue issuances that cover subject matters
Administrative dealing strictly with the permanent
Orders (RAO) administrative set-up of the Bureau,
more specifically, the organizational
structure, statements of functions and/or
responsibilities of BIR offices, definitions
and delegations of authority, staffing and
personnel requirements and standards
of performance
Revenue refer to functions delegated by the
Delegation of Commissioner to revenue officials in
Authority accordance with law
Orders (RDAO)

o Non-impairment of the jurisdiction of the SC

(Consti, Art. VIII)

SECTION 2.
The Congress shall have the power to define, prescribe, and
apportion the jurisdiction of various courts but may not
deprive the Supreme Court of its jurisdiction over cases
enumerated in Section 5 hereof.
No law shall be passed reorganizing the Judiciary when it
undermines the security of tenure of its Members.

SECTION 5.
The Supreme Court shall have the following powers:
(2) Review, revise, reverse, modify, or affirm on appeal or
certiorari, as the law or the Rules of Court may provide, final
judgments and orders of lower courts in:
(b) All cases involving the legality of any tax, impost,
assessment, or toll, or any penalty imposed in relation
thereto.

Sources of tax laws

1. Constitution
2. Statutes
3. EOs and PDs
4. International Agreements
5. Administrative Issuances
6. Jurisprudence

BIR Issuances